Insurance Amendment Bill, 2021

The government introduced a bill in Rajya Sabha to amend the Insurance Act, of 1938 and raise the foreign direct investment cap to 74% from 49%.

Provisions:

The Act allows foreign investors to hold up to 49% of the capital in an Indian insurance company, which must be owned and controlled by an Indian entity.
The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
However, such foreign investment may be subject to additional conditions as prescribed by the central government.
The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities.
If the insurer is incorporated or domiciled outside India, such assets must be held in India in a trust and vested with trustees who must be residents of India.

Insurance companies are facing liquidity pressure and the higher limit would help meet the growing capital requirement.

Source: TH

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